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India opens door to much higher potash subsidies

Here we go. Despite buzz circulating in recent weeks, India is not
actually signing potash supply contracts at $390 per ton of the key
fertilizer component. But the real news is even more bullish. What
really happened is that India is talking about raising the maximum
subsidy it will pay on all potash purchases from a contemplated
$350 a ton to $390 a ton. In other words, Delhi is not just locking
in potash at $390 a ton -- a little under the current asking price
-- but setting an effective floor on prices at roughly where we are
now. Expect Indian farmers to pay around $450 a ton next year, with
the government picking up as much as 86% of that price. The main
reasons for higher potash prices are still the same as before:
strong demand and problems with supply. Demand is obvious, with
everyone talking about food inflation and crop failure in China.
Supply is less monolithic, but boils down to problems at producers
-- strikes at ICL, a production halt at K+S and delivery
interruptions in Europe -- and declining stockpiles in places like
India. Potash suppliers are already sold out for the current
quarter. Your fertilizer basket:
POT
(
quote
),
MOS
(
quote
),
AGU
(
quote
),
ICL
(
quote
),
YARIY
(
quote
),
SYT
(
quote
), even
MON
(
quote
).

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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